Stats

August 20, 2012

Debtors Prison

The anti-lender bias in a large portion of the main stream media (and in a good chunk of the banking trade press, for that matter) is no better exemplified than by this recent article in the St. Louis Post-Dispatch, in which reporter Jim Gallagher waxes apoplectic about payday lenders throwing hapless consumers into "debtors prison."

The Bill of Rights in the Missouri constitution declares that “no person shall be imprisoned for debt, except for nonpayment of fines and penalties imposed by law.” Still, people do go to jail over private debt. It's a regular occurrence in metro St. Louis, on both sides of the Mississippi River.

Here's how it happens: A creditor gets a civil judgment against the debtor. Then the creditor's lawyer calls the debtor to an “examination” in civil court, where they are asked about bank accounts and other assets the creditor might seize.

If the debtor doesn't show, the creditor asks the court for a “body attachment.” That's an order to arrest the debtor and hold him or her until a court hearing, or until the debtor posts bond.

That's analogous to having the police arrest a person who's been charged with contempt of court for not showing up for a court hearing (which this is, by the way), or reporting for jury duty, or for giving a judge the finger. It's not throwing someone in the slammer because he or she hasn't paid a debt. It's throwing them in prison because they've disobeyed the law.

Critics of "body attachments" aren't swayed by such arguments, though. To them, the practice is pure evil, squared.

The practice draws fire from legal aid attorneys and some politicians. They call it modern-day debtors prison, a way to squeeze money out of people with little legal knowledge.

Debtors are sometimes summoned to court repeatedly, increasing chances that they'll miss a date and be arrested. Critics note that judges often set the debtor's release bond at the amount of the debt and turn the bond money over to the creditor -- essentially turning publicly financed police and court employees into private debt collectors for predatory lenders.

“You wouldn't want to be spending taxpayer money to collect $400 and $500 debts. Don't the county police have something better to do?” asks Rob Swearingen, attorney for Legal Services.

Sure they do. There's a donut with each officer's name on it waiting at the local Dunkin', but every once in a while, the police have to do what they were originally intended to do when police forces were first created by kings: prevent the aggrieved from engaging in self help.

The purpose of the post-judgment hearings that are discussed in the story is obvious: to permit the creditor to determine whether the debtor (against whom the creditor holds a judgment rendered by a court) has any non-exempt assets against which the judgment can be satisfied. These procedures have been around for a long, long time, and until the Occupy My Cranium crowd decided that 99% of the population should get something for nothing and their chicks for free, nobody seriously objected. Now, however, the horror of the coming Zombie Apocalypse is exceeded only by the horror of creditors expecting to be repaid the money they've loaned.

Much is made of the fact that the governor and attorney general of Illinois were so "outraged" by "body attachments" that they led the charge to enact a law that "restricts body attachment for civil debt." It's not until nearly the end of the very long, slanted article, full of human interest sob stories of debtors who pay as much attention to court orders as they did to their debts, that the nature of that "restriction" is discussed in any detail.

The new law in Illinois forbids body attachments in private debt cases if the defendant doesn't appear for an examination hearing. Instead, the judge may issue a second summons, threatening a contempt of court action. Only if the defendant skips again can an arrest be ordered.

Debtors can't be repeatedly summoned for examinations unless the creditor has evidence that the debtor's circumstances have changed. And bond money can no longer be routinely turned over to creditors.

The law also changed the practice of summoning debtors by mail. Now the summons must be given to them personally, or to someone at their home. Missouri requires service to the person or someone in the household over age 14.

That's not exactly suppressing the right to summon debtors to court for examination or throwing them in jail if they ignore the court. While it may require more than one "no show" now to merit arrest, and while crafty creditors' counsel who play games with the system to try to pressure debtors into coughing up some cash will have a much harder time doing so, the "outrage" displayed by the Illinois AG and Governor seems more fueled by populist posturing by politicians and their supporters in the press corps who love to stoke the fires of class warfare than it does over any sense of fundamental fairness. The contempt for, and mischaracterization of, long-standing judicial processes designed to ensure that creditors have adequate remedies to collect the debts owed to them and to enforce judgments rendered by courts is more than a little cynical.

Then again, it's an election year.

On a related matter: I wonder if I can concoct a way to secure a body attachment on Scarlett Johansson?